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What are punitive damages? How frequently are they awarded? Where are punitive damages insurable and what types of insurance products are available?

This paper addresses these questions and finds:

  1. Availability of Punitive Damage: While the U.S. Supreme Court has suggested that the maximum allowable punitive-to-compensatory award ratio is 4:1, state courts have nonetheless applied those guidelines to uphold ratios of 16:1;

  2. Insurability of Punitive Damages: Those states where insurability is unsettled or restricted are where the majority of U.S. economic activity occurs and where, according to some data, nearly all of the punitive damage awards are made;

  3. Prevalence of Punitive Damage Awards: New data shows the increasing prevalence of punitive damage awards, and

  4. Insurance Products for Punitive Damages: There are pros and cons to the insurance products designed to cover punitive liability.

Defining Punitive Damages

Our report provides information on the availability and prevalence of punitive damage awards, the insurability of punitive damages in the United States, and the pros and cons of insurance products designed to cover punitive liability.